Cognitive Biases in Corporate Decision Making Processes

The hockey view of the “opportunity” is representative of many corporate decisions that have failed to create projected value.

Dysfunctional decision-making process are prevalent from the Board Room to the Factory Floor. After all, we are all only human!

Heuristics and Cognitive Biases

Humans benefit from fast and efficient decision-making.

The human brain is about 2% of the average human’s total body weight, yet it accounts for 20% of the calories consumed.

Heuristics can be thought of as mental shortcuts used by the brain. Extremely high volumes of sensory input constantly need to be processed to make fast and cheap (calorically speaking) decisions that are good enough to survive. Survival heuristics from several million years of survival in the wild probably haven’t been optimized yet for the dangerous place we call the office.

When a person sees a large growling object with large fangs, heuristics say “Run — you can figure out if it is dangerous later.”

Cognitive biases occur when our heuristics make systematic errors for our current environment. When cognitive biases drive corporate decision-making, failure is sure to follow.